Oil inventories

The EIA (U.S. Energy Information Administration) estimates that OECD’s (Organization for Economic Cooperation and Development) oil inventories rose by 22.3 MMbbls (million barrels) to 3,109 MMbbls in January 2017—compared to the previous month. OECD’s oil inventories rose 0.7% month-over-month and 3.5% year-over-year. The oil inventories are at the highest level ever. Record oil inventories are bearish for crude oil (PXI) (ERX) (DIG) (USL) (IXC) prices. For more on crude oil prices, read Part 1 of this series.

OECD’s Oil Inventories Reached an All-Time High

OPEC’s estimate

OPEC’s (Organization of the Petroleum Exporting Countries) Monthly Oil Market Report stated that OECD countries’ oil inventories fell by 33.8 MMbbls in December 2016 to 2,999 MMbbls. It’s 299 MMbbls above the five-year average.

IEA’s estimate

The IEA (International Energy Agency) estimates that OECD’s oil inventories fell for the fifth consecutive month in January 2017. However, they’re above the five-year average.

Oil inventories in 2017 and 2018

OECD’s oil inventories averaged 2,860 MMbbls in 2015. The inventories averaged 3,043 MMbbls in 2016. The EIA expects OECD’s oil inventories to average 3,083 MMbbls and 3,102 MMbbls in 2017 and 2018, respectively.

Impact of OECD’s crude oil inventories

The rise in OECD’s oil inventories will pressure crude oil prices. Lower crude oil prices have a negative impact on crude oil and natural gas producers’ revenues such as Marathon Oil (MRO), Comstock Resources (CRK), Northern Oil & Gas (NOG), Synergy Resources (SYRG), Chevron (CVX), and W&T Offshore (WTI).

Read What Can Investors Expect in the Crude Oil Market in 2017 and Could Donald Trump Be the Biggest Driver for Crude Oil Prices? for more on crude oil prices.

Read Will Crude Oil Prices Test 3 Digits Again and Why Major Banks Upgraded Crude Oil Price Forecasts for more on crude oil price forecasts.

For more industry analysis, visit Market Realist’s Energy and Power page.

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